Builders in Victoria have to buy domestic building insurance policies on behalf of homeowners before they take deposits or any money for projects of more than $16,000.
The requirement falls under the Domestic Building Insurance Ministerial Order.
"The law requires builders to take out a domestic building insurance policy on behalf of a client before taking a deposit," a government spokesman said.
"Customers rightly expect their construction firms to obey the law - and we're now looking into concerning allegations relating to Porter Davis's conduct."
Liquidators Grant Thornton on Tuesday held a webinar for Porter Davis customers following the company's collapse.
Liquidator Said Jahani suggested some were without insurance, saying they fell into a gap between paying Porter Davis a deposit and not having an insurance policy until weeks or months later when a permit was obtained.
"At its extreme, it means you do not have any insurance cover and it means that the deposit you have paid has been lost," Mr Jahani said.
Melbourne resident Eric Poon, 33, says he is among Porter Davis customers left without insurance, and argues the suggestion some people fell through the gap is an attempt to rationalise the home builder's actions.
He and wife Abby Zhong paid the deposit for their Porter Davis home at Lilydale in Melbourne's outer-northeast in December 2020, but the land was only titled last week because of delays in a land developer handing over the property.
Porter Davis told the couple they'd arranged insurance for them, but when they contacted the firm in the wake of the home builder's demise, they were told they didn't have a policy, Mr Poon said.
The Victorian Managed Insurance Authority couldn't find any insurance policy in Mr Poon's name, and the couple now faces paying off two mortgages - one, for their current residence at Glen Waverley - after interest rates skyrocketed.
"This has put a considerable financial strain on us," Mr Poon told AAP.
"We were hoping to complete the construction of our new home as soon as possible so that we could rent out our current apartment and generate some cash flow."
Mr Poon was also concerned about allegations Porter Davis was trading while insolvent, and said the government should care for people whose livelihoods were put at risk by building companies' collapses.
"We are already dealing with a rental and building shortage crisis, and now consumers don't feel protected and are afraid to build," Mr Poon said.
Porter Davis customers unsure if they have domestic building insurance have been encouraged to contact the Victorian Managed Insurance Authority, which is dealing with claims in the state.
Other firms also offer domestic building insurance.
The Queensland Building and Construction Commission is dealing with claims from the Porter Davis fallout, with about 1500 properties in Victoria and 200 in Queensland estimated to be affected by the company's demise.
Those without a certificate of insurance should contact liquidators Grant Thornton.
Grant Thornton has been contacted for comment.
7°C